EVs Crush GM In China
The world’s largest car manufacturers used to make huge profits in China. Often, they ran joint ventures with Chinese companies. The profits ballooned as China passed the US as the world’s largest car market.
The global car manufacturer has seen China’s profits disappear in the last two years. The primary reason is the brisk demand for EVs in the world’s largest country by population. That means the profits of multinational companies like GM, Toyota, and VW won’t return to what was once a primary source of revenue. China EV companies have been posting record sales.
According to an analysis by Axios, Toyota’s profits in China have dropped 73% in the last year. Additionally, Axios wrote, “GM CEO Mary Barra said last week that the situation in China is “unsustainable” and the company is restructuring its business there.”
The huge legacy car companies have a massive problem. China’s EV companies, led by BYD, build sub-$25,000 EVs, which have been tagged as relatively high-quality vehicles. Warren Buffett recently sold most of his BYD stock. These companies do well in China and have started to spread to global markets. Legacy car companies have been unable to match China’s EVs on a cost basis.
The US and EU’s solution is to impose tariffs on China’s EVs to keep them out of their markets. If that does not continue, the world’s multinational car companies will suffer in China and in their home markets as well.
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